The Tax System Explained:

[Mad Dawg Wiccan]

THE TAX SYSTEM EXPLAINED IN BEER

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100...

If they paid their bill the way we pay our taxes, it would go something like this...

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do..

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said,

"I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes So the first four men were unaffected. They would still drink for free. But what about the other six men ?

How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

"I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man,"but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works.
The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.
Tax them too much, attack them for being wealthy, and they just may not show up anymore.
In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics.

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.

[Deleted]

Simple language for simple people.
;D

[Mad Dawg Wiccan]

PS - Iggy gets credit for this, she posted it on EE first.

[Mkitty is pro kitty]

How could they divide the $20 windfall so that everyone would get his fair share?

Since $20 = 20% of $100, just have everyone pay 20% less. Wow, consistent and fair!

So

The first four men (the poorest) would pay nothing.
The fifth would pay .80
The sixth would pay $2.40
The seventh would pay $5.60
The eighth would pay $9.60
The ninth would pay $14.40
The tenth man (the richest) would pay $47.2

Oh, and where are the Conservatives on wage increase percentage equality? I know, "we only hate unfairness that doesn't benefit us or corporations!"

BTW, the top 400 richest people pay a lower percentage in taxes, so spare us the "the rich pay a higher percentage routine." They're called tax breaks.

The nine men surrounded the tenth and beat him up.

That's what you get for giving yourself double digit raises and keeping their wages flat, I guess. If he pays them more, they pay more in taxes.

Tax them too much, attack them for being wealthy, and they just may not show up anymore.

Bye, bye! Nobody's irreplacable. In fact why not move the ninth man to the tenth man. etc?

In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

If it were, they'd be there by now. Anyone remember when moving overseas was unpatriotic and not thought of as "being smart money-wise"?

David R. Kamerschen, Ph.D.

www.snopes.com/business/taxes/howtaxes.asp

Oh, you Conservatives and your copy-pasta, which usually contain fallacies, gross oversimplifcations, and people put in weird situations that in no way reflect what's going on. What is wrong with using reality as your model?

Also, go here for a refutation:
www.viralgrapevine.com/how-tax-cuts-work-by-david-r-kamerschen-refuted-the-real-way-tax-work-removing-the-internet-garbage/

Note how there's more realism put into it.

[Deleted]

again
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible

[Mkitty is pro kitty]

May 4, 2011 13:14:29 GMT -5 Mkitty is pro kitty said:

How could they divide the $20 windfall so that everyone would get his fair share?

Since $20 = 20% of $100, just have everyone pay 20% less. Wow, consistent and fair!

So

The first four men (the poorest) would pay nothing.
The fifth would pay .80
The sixth would pay $2.40
The seventh would pay $5.60
The eighth would pay $9.60
The ninth would pay $14.40
The tenth man (the richest) would pay $47.2

Oh, and where are the Conservatives on wage increase percentage equality? I know, "we only hate unfairness that doesn't benefit us or corporations!"

BTW, the top 400 richest people pay a lower percentage in taxes, so spare us the "the rich pay a higher percentage routine." They're called tax breaks.



That's what you get for giving yourself double digit raises and keeping their wages flat, I guess. If he pays them more, they pay more in taxes.



Bye, bye! Nobody's irreplacable. In fact why not move the ninth man to the tenth man. etc?



If it were, they'd be there by now. Anyone remember when moving overseas was unpatriotic and not thought of as "being smart money-wise"?

David R. Kamerschen, Ph.D.

He didn't write it.
www.snopes.com/business/taxes/howtaxes.asp

But if it has a "Ph.D." attached to it it must mean someone with lots of smartz must have written it!

Oh, you Conservatives and your copy-pasta, which usually contain fallacies, gross oversimplifcations, and people put in weird situations that in no way reflect what's going on. What is wrong with using reality as your model?

Also, go here for a refutation:
www.viralgrapevine.com/how-tax-cuts-work-by-david-r-kamerschen-refuted-the-real-way-tax-work-removing-the-internet-garbage/

Note how there's more realism put into it.

[floridayankee]

May 4, 2011 13:26:14 GMT -5 @insurancegal said:

Iggy MDW and Krickitt and xmascookie!

WHAT!! I didn't make the list??

[frep]

May 4, 2011 13:14:29 GMT -5 Mkitty is pro kitty said:

How could they divide the $20 windfall so that everyone would get his fair share?

Since $20 = 20% of $100, just have everyone pay 20% less. Wow, consistent and fair!

So

The first four men (the poorest) would pay nothing.
The fifth would pay .80
The sixth would pay $2.40
The seventh would pay $5.60
The eighth would pay $9.60
The ninth would pay $14.40
The tenth man (the richest) would pay $47.2

If they did use a straight 20% reduction how would this change anything. They weren't arguing about he got 33% and I only got 22%.

Using your 20% it just changes it to:

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

"I only got 60 cents out of the $20 saving," declared the sixth man. He pointed to the tenth man,"but he got $11.80!"

"Yeah, that's right," exclaimed the fifth man. "I only saved 20 cents too. It's unfair that he got fifty nine times more benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $11.80 back, when I got only $1.40? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"

The nine men surrounded the tenth and beat him up.

[Deleted]

May 4, 2011 13:17:38 GMT -5 @xmascookie said:

again
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible

So i'll stop wasting my time trying to explain things to you then...

[burnsattornincan]

In fact why not move the ninth man to the tenth man. etc?

Like putting someone in who is unqualified for the job? Thats what you call Affirmative Action!

[Deleted]

[floridayankee]

May 4, 2011 13:50:38 GMT -5 @insurancegal said:

Because, Yank, you are smart enough to 1. know this is an effin joke and 2. know to not take it seriously and 3. know I you-it goes without saying!

It's good to feel loved...even if I guilted ya in to it....

[shelby]

simple = simple minded people indeed

[fairlycrazy23]

It is simple explanation of how progressive tax system works, including when there is a tax reduction.

We need to implement the fairtax and get rid of all the BS surrounding the gigantic mess that is current tax code.

[Mad Dawg Wiccan]

May 4, 2011 16:32:28 GMT -5 fairlycrazy23 said:

It is simple explanation of how progressive tax system works, including when there is a tax reduction.

We need to implement the fairtax and get rid of all the BS surrounding the gigantic mess that is current tax code.

Agreed.